Buying your forever home is a very different process to buying an investment property. The value of an investment property can be measured in dollars and cents, whereas the value of a home is often more emotionally influenced. Both are and should be long-term decisions, but have a different set of requirements.
So how are they different?
Here are three keys things to consider when looking to buy your next property.
Emotion vs Finance:
A home is somewhere to hopefully live for a long time, if not a lifetime. It is a place to create memories and should be something you can grow into.
When you’re looking for a home, it needs to be somewhere you can afford, but the dollars and cents equation (that comes into investment decisions) can be less deal-breaking as we tend to spend a little bit more to get the right place for us, rather than worry so much about return on investment.
An investment property is a numbers game, so the value proposition is about return on investment in dollars and cents. Will your investment property allow you to service the mortgage? Will it increase in value?
A home is somewhere that suits the lifestyle you want and somewhere you can grow into with your family. Maybe it’s close to schools for a young family, or closer to the city for a young couple, or maybe it’s country living you crave.
Investment properties are about buying in a suburb or town that will increase the value of the property over time, whilst giving you the cash flow to manage the mortgage. Sometimes you need to have a little foresight to see the opportunity for an investment property in an up and coming area.
Age and style:
We also consider the age of the property when buying investments, but this is far less of a deal-breaker with a home. Some people love the older style properties; a place where someone else has lived and grown and cared for as it was their own. These kinds of places really do have a heart and soul all their own, and when you find that perfect one that connects with you on a personal level, age doesn’t matter.
For investment, on the other hand, usually buying as new as possible is the way to go as there are more financial benefits to doing so. Usually, newer places will require less maintenance, and there are great tax benefits to buying somewhere new.
Whichever is your focus now, remember there are different things to consider when buying a home and when buying an investment property.
One you will live in, and one you’re buying to make money. Buying your home is an emotional decision, but buying an investment property should not be. Being able to see the difference in the way you look at both options will serve you well in getting the most out of each property, whatever the reason for buying.